Week Sept 7 2012 – Weekly Recap & The Week Ahead
“The market can stay irrational longer than you can stay solvent.” John Maynard Keynes.
1. Spanish, Italian yields fall on Draghi bond comments — ECB President Mario Draghi indicated that the bank would be open to buying government bonds with a maturity of 2-3 years, telling the European Parliament that doing so wouldn’t contravene EU treaties.
2. Moody’s Changes Euro Zone Rating Outlook to ‘Negative’ — NYTimes reported Moody’s Investors Service cut the European Union’s credit outlook to negative on Monday, reflecting the risks to Germany, France, Britain and the Netherlands, the four countries in the group with AAA ratings, which account for about 45 percent of the group’s budget revenue.
Moody’s also lowered the outlook on the union’s AAA long-term bond rating from stable.
3. DOJ accuses BP of “gross negligence” — the Department of Justice sharpened its rhetoric against BP (BP) and Transocean (RIG) over the Deepwater Horizon oil spill, accusing the companies of “gross negligence” in deciphering a key pressure test.
4. Spain plays game of chicken with ECB –knowing that the ECB is set to start bond purchases, Spain has begun a game of chicken: Finance Minister Luis de Guindos said the country isn’t so sure it will submit to a full-blown bailout if the terms are too harsh. Germany thought it had a deal – forcing Spain and Italy into Greek-like austerity in exchange for allowing the ECB to buy government debt.
5. Bank of England and the ECB left interest-rate unchanged — The BOE kept its interest rate unchanged at 0.5% and made no changed to its 375 billion pounds ($596.5 billion) asset-purchase program. The ECB kept its key lending rate at 0.75% as the ECB President Mario Draghi stated that ECB would engage in outright monetary transactions, or OMTs, to address “severe distortions” in government bond markets based on “unfounded fears”.
6. China unleashes $158B infrastructure stimulus — according to CNN, China is ramping up the stimulus as it seeks to boost its slowing growth, disclosing plans for 13 highway construction projects, nine sewage-treatment plants, seven waterway schemes, and five port and warehouse projects. That’s on top of the 25 subway projects China announced earlier this week, and takes total spending to 1T yuan ($158B).
The week ahead — Economic data from Econoday.com:
